The CERC ruling will help in reducing Mundra project's annual losses by Rs 1,100 crore, according to Tata Power Ltd. The 4,000 MW Mundra ultra mega power project, located in Gujarat, is estimated to be incurring a loss of Rs 1,500 crore annually mainly due to rise in price of Indonesian coal that is used to fire the plant.

According to Tata Power Managing Director Anil Sardana, the CERC ruling would help in reducing losses incurred by Mundra Project. The annual losses are expected to come down by Rs 1,100 crore.

The Central Electricity Regulatory Commission (CERC) has allowed a compensatory tariff of Rs 0.524 for every unit of electricity generated from Mundra plant. This tariff is for the period beyond April 1, 2013.

The company said that tariff for the project, which would go up to Rs 2.90 per unit still remains very competitive.

Sardana on Wednesday said the hike in electricity tariff would be in the range of 45-47 paise per unit. The final tariff would be around Rs 2.90.

The power purchase agreements with the five procurer states is for selling electricity at Rs 2.26 per unit.

Taking into account fluctuations in exchange rate, the tariff of electricity produced from the plant is now around Rs 2.45 per unit.

The estimate of "45-47" paise hike in tariff is after taking into account various other factors including those related to Return on Equity (RoE), according to the company.

Even after the tariff hike, the cost of power sourced from Mundra plant would be "very very competitive" compared to electricity sourced by beneficiaries from other sources, he said.

At present, he said the cost of electricity decided through competitive bidding in long-term power purchase agreements is above Rs 4 per unit.

"It (CERC ruling) is actually a great win for customers... an asset has been salvaged," he added.